One day in the life of a very common stock |
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Authors: | Easley, D Kiefer, NM O'Hara, M |
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Affiliation: | 1 University of Aarhus, Denmark z Corresponding author at: Johnson Graduate School of Management, Malott Hall, Cornell University, Ithaca, NY 14853, USA |
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Abstract: | Using the model structure of Easley and O'Hara (Journal of Finance,47, 577-604), we demonstrate how the parameters of the market-maker'sbeliefs can be estimated from trade data. We show how to extractinformation from both trade and no-trade intervals, and howintraday and interday data provide information. We derive andevaluate tests of model specification and estimate the informationcontent of differential trade sizes. Our work provides a frameworkfor testing extant microstructure models, shows how to extractthe information contained in the trading process, and demonstratesthe empirical importance of symmetric information models forasset prices. |
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